Jessica Coria

Tradable Permits in Developing Countries: Evidence From Air Pollution in Chile

Santiago was one of the first cities outside the OECD to implement a tradable permit program to control air pollution. This article looks closely at the program’s performance over the past 10 years, stressing its similarities and discrepancies with trading programs implemented in developed countries and analyzing how it has reacted to regulatory adjustments and market shocks. Studying Santiago’s experience allows us to say that a middle-income country such as Chile is capable of implementing this type of scheme even if much work remains before the design is really satisfactory. Considering the urgency of improving the environment in many of these countries, it is important to use the whole range of potential instruments.

Tradable Permits in Developing Countries: Evidence from Air Pollution in Santiago, Chile

Santiago was one of the first cities outside the OECD to implement a tradable permit program to control air pollution. This paper looks closely at the program’s performance over the past ten years, stressing its similarities and discrepancies with trading programs implemented in developed countries, and analyzing how it has reacted to regulatory adjustments and market shocks. Studying Santiago’s experience allows us to discuss the drawbacks and advantages of applying tradable permits in less developed countries.

To trade or not to trade: firm-level analysis of emissions trading in Santiago, Chile.

Whether tradable permits are appropriate for use in transition and developing economies--given special social and cultural circumstances, such as the lack of institutions and lack of expertise with market-based policies--is much debated. We conducted interviews and surveyed a sample of firms subject to emissions trading programs in Santiago, Chile, one of the first cities outside the OECD that has implemented such trading. The information gathered allows us to study what factors affect the performance of the trading programs in practice and the challenges and advantages of applying tradable permits in less developed countries.

Carbon Pricing: Transaction Costs of Emissions Trading vs. Carbon Taxes

In this paper we empirically compare the transaction costs from monitoring, reporting and verification (MRV) of two environmental regulations directed to cost-efficiently reduce greenhouse gas emissions: a carbon dioxide (CO2) tax and a tradable emissions system. We do this in the case of Sweden, where a set of firms are covered by both types of regulations, i.e., the Swedish CO2 tax and the European Union’s Emissions Trading System (EU ETS). This provides us with an excellent case study as it allows us to disentangle the costs of each regulation from other firm-specific variables that might affect the overall cost of MRV procedures. Our results indicate that the MRV costs of CO2 taxation do not depend on firms’ emissions, while they do in the case of the EU ETS. For firms of equivalent emissions’ size, the MRV costs are lower for CO2 taxation than for the EU ETS, which confirms the general view that regulating emissions upstream by means of a CO2 tax yields lower transaction costs vis-a-vis downstream regulation by means of emission trading.

Has Forest Certification Reduced Forest Degradation in Sweden

This paper estimates the effects of certification of nonindustrial private forest owners on forest degradation in Sweden—one of the countries with the largest total area of certified forests. We rely on official forest inventory data, information on certification status, and impact evaluation methods to identify the causal effect of certification on three key environmental outcomes. We find that certification has not halted forest degradation in that it has not improved any of the environmental outcomes. Moreover, for forest certification to have an effect, the standards should be tightened and the monitoring and enforcement of forest certification schemes strengthened. (JEL Q23, Q28)

Fuel Taxation in Europe

Based on the European experience, this chapter highlights the very important role of motor fuel taxes for carbon emission mitigation. Fuel demand and CO2 emissions would have been much higher in the absence of fuel taxes of the level currently implemented in Europe. Moreover, given the close link between fuel consumption and CO2 emissions, fuel taxes are likely to be more effective reducing CO2 emissions than alternative policies such as fuel-efficiency standards. Nevertheless, in order to reduce the broad range of external costs of road transportation, additional instruments are necessary. The fuel demand elasticities and the role of fuel taxes reducing CO2 emissions are discussed, and policy recommendations are provided.

Biodiversity Conservation and Ecosystem Services Provision: A Tale of Confused Objectives, Multiple Market Failures and Policy Challenges

Most research and funding in conservation has been oriented toward biodiversity per se. Until recently there has been little tangible effort in linking conservation to ecosystem service provision. Nevertheless, this trend seems to be changing due in part to the relative success of payment mechanisms that provide funding for the conservation of ecosystem services – defined as discrete and identifiable end-products. This paper describes the features of optimal policies to protect (i) biodiversity vs. (ii) ecosystem services and analyze to what extent the criteria in (i) and (ii) set against each other or create synergies. We also analyze how payments for ecosystem services affect the relationship between biodiversity and ecosystem services conservation.

Policy Monitor—The Economics of Toxic Substance Control and the REACH Directive

The European Union (EU) regulation on the registration, evaluation, authorization, and restriction of chemicals, known as the REACH Directive, is intended to improve the protection of human health and the environment through the better and earlier identification of the intrinsic properties of the thousands of chemicals commonly used in the EU. This article presents an overview of the technical and economic challenges of toxic substance control and discusses how REACH has addressed the challenges of chemical regulation. The article identifies a number of barriers encountered in implementing REACH, including the fact that critical data concerning the toxicological properties of chemicals is missing from about 90 percent of the 184 REACH registration dossiers examined. The article also discusses how the information generated by REACH could be used to develop complementary policies, such as risk-based taxation, to better reflect the external effects of harmful chemicals and to provide further incentives for the development of products and processes that minimize the generation and use of hazardous substances. The article concludes by highlighting key insights and guidance for industry, policymakers, and academic researchers that can be derived from this examination of the economics of toxic substance control and REACH.

On Refunding of Emission Taxes and Technology Diffusion

We analyze diffusion of an abatement technology in an imperfectly competitive industry under a standard emission tax compared to an emission tax which is refunded in proportion to output market share. The results indicate that refunding can speed up diffusion if firms do not strategically influence the size of the refund. If they do, it is ambiguous whether diffusion is slower or faster than under a non-refunded emission tax. Moreover, it is ambiguous whether refunding continues over time to provide larger incentives for technological upgrading than a non-refunded emission tax, since the effects of refunding dissipate as the overall industry becomes cleaner.

The Economics of Environmental Policy

Environmental Policy is an increasingly important subject as we enter an era where environmental issues are affecting all walks of life. This informative collection provides a guide through the behavioral and political foundations of environmental economic policy. It includes an in-depth view of the current economic discipline whilst incorporating research from other social and behavioral sciences. Students and scholars as well as environmental policy makers will find this an essential tool to navigate the political and behavioural issues that we have to understand in order to resolve some of the biggest political issues of our time.